Financial Resolutions to Consider for 2024

Contributed by: Kelsey Arvai, CFP®, MBA

As the year comes to a close, it is time to start thinking about the New Year and starting it off on the right foot. What better way to accomplish this than by improving your financial health in 2024? January is Financial Wellness Month and Wealth Mentality Month – which serves as a reminder to get our finances in order and plan out our financial strategies. It is also the perfect opportunity to check in with your Financial Advisor to ensure you are financially prepared both in the short and long term.

While planning your financial resolutions, remember to be specific about what you want and why. The key to success is being clear about your priorities and choosing a particular goal. Make sure your goals are attainable, write them down, and post them somewhere where you will be reminded of them often. You can ensure accountability by creating calendar reminders to check in on your goals throughout the year.  

For additional resources on Financial Planning tips going into the New Year, check out this blog from Sandy Adams. I have also provided some additional ideas below from a previous blog of mine:

Automate Savings & Debt Reduction

Establishing and maintaining a positive cash flow is a top-tier priority for your financial health. Automation is key to efficiency and effectiveness while working towards your financial goals. Prioritizing your savings contribution through automation helps hedge against the temptation to spend the funds elsewhere. Utilizing automatic payments for your credit card could help your credit score if the payment happens before your due date. After establishing an emergency fund through your automated savings, you might consider directing excess cash to your retirement and health savings plans.

Max Out Your 401(k) & Health Savings Account (HSA)

The beginning of the year is a great time to review your 401(k) and HSA contributions to ensure that you are maximizing your benefits and taking advantage of increased deferral limits for 2024. 401(k), 403(b), and most 457 plan limits are now up to $23,000 for elective employee deferral. The catch-up contribution limit for employees aged 50 allows for an additional savings of $7,500. Similarly, HSA contribution limits are up to $4,150 for individuals and $8,300 for family coverage, with an additional $1,000 for employees 55 for older. Since HSAs are not "use-it-or-lose-it" accounts, and they can be spent on any expense without penalty after 65, it is advantageous to fully fund these accounts every year.

Plan for Charitable Giving

Most people wait until December to give, but we recommend not being in such a rush that you wait until the end-of-the-year deadline and lose sight of your charitable goal. The beginning of the year is a great time to develop a plan for your year ahead.

Invest in Your Emotional and Physical Well-Being

As you take stock of your financial health this year, carving out time for your physical health is equally paramount. There is a connection between health and wealth; each should be analyzed and reviewed professionally, at least annually.

Reach Out to Your Financial Advisor 

Working with your advisor, at least annually, can provide support to keep you on track while determining and working towards financial goals.

On behalf of all of us at The Center, we wish you a happy and healthy 2024!

Kelsey Arvai, CFP®, MBA is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the Kelsey Arvai, MBA, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Impending Social Security Shortfall?

Contributed by: Josh Bitel, CFP®

About 1 in 4 married couples, and almost half of unmarried folks, rely on Social Security for a whopping 90% (!) of their retirement income needs. While the Social Security Administration recommends that no more than 40% of your retirement paycheck come from Social Security, the reality is that many Americans depend heavily on this benefit. The majority of Social Security funds come from existing workers paying their regular payroll taxes; however, when payroll is not enough to cover all claimants, we must then dip into the trust fund to make up the difference. According to the 2023 Social Security and Medicare Trustees Reports, the 'trust fund' that helps supply retirees with their monthly benefits is projected to run out of money by 2033. This estimate has many folks understandably worried, but experts have proposed several potential solutions that could help boost solvency.

One popular solution is to raise the age at which retirees are permitted to file for benefits. Currently, a claimant's full retirement age (the age at which you receive 100% of the benefits shown on a statement) is between 66 and 67. Studies published by the Congressional Budget Office show that raising by just two months per year for workers born between 1962 and 1978 (maxing out at age 70) could save billions of dollars annually in Social Security payments, thus helping cushion the trust fund by a substantial amount.

Another hotly debated solution is reducing annual cost-of-living adjustments (COLA) for claimants. As it currently stands, your Social Security benefit gets a bump each year to keep up with inflation (the most recent adjustment was 8.7% for 2023). This number is based on the consumer price index report and is a tool used to help retirees retain their purchasing power. Recent studies from the SSA show that if we reduced COLA by 0.5%, we could eliminate 40% of the impending shortfall. This goes up to 78% if we assume a 1.0% reduction in COLA. Neither of these solutions completely solves the shortfall, but a combination of COLA reductions and changes to FRA, as shown above, would go a long way toward solving this issue.

These are just a few of the several solutions debated by experts each year. It is important to note that even if no changes are made, current beneficiaries will continue to receive their payments. However, estimates show that if the trust fund ran completely dry, payments may be reduced by as much as 25%. While this is not an insignificant haircut, it is certainly better than cutting payments altogether.

The point is that Social Security is a crucial part of many retirees' livelihoods. It would be safe to assume that Congress would act and make changes before any major benefit cuts are required. These are several options to consider that would have varying impacts on not only solvency but also benefits themselves. If you are concerned about the role of Social Security in your personal retirement plan, discuss with your advisor how these changes may impact you.

Josh Bitel, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Josh Bitel, CFP® and not necessarily those of Raymond James.

There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Financial Literacy Never Stops!

Contributed by: Sandra Adams, CFP®

April is Financial Literacy Month. When many of us think about financial literacy, our thoughts immediately go to our children and educating them on the basics of money – debt, credit, budgeting, and the like. But the reality is that financial literacy is a lifelong process and applies to all of us at all ages and stages of life – the learning never stops. From a child's earliest spending to a senior citizen's retirement decisions, individuals apply their knowledge and skills to financial choices, and it is important that they are making informed decisions at all stages.

What we know:

• People who are financially literate are generally less vulnerable to financial fraud.

• Research shows that financial illiteracy is very common, with the Financial Industry Regulatory Authority (FINRA) attributing it to 66% of Americans.

• In its Economic Well-Being of U.S. Households in 2020 report, the U.S. Federal Reserve System Board of Governors found that many Americans are unprepared for retirement. More than one-fourth indicated that they have no retirement savings, and fewer than four in 10 of those not yet retired felt that their retirement savings are on track.

• Low financial literacy has left millennials—the largest share of the American workforce—unprepared for a severe financial crisis, according to research by the TIAA Institute. Over half lack an emergency fund to cover three months' expenses, and 37% are financially fragile (defined as unable or unlikely to come up with $2,000 within a month in the event of an emergency).

A strong foundation of financial literacy can help support various life goals, such as saving for education or retirement, using debt responsibly, and running a business. Key aspects of financial literacy include knowing how to create a budget, plan for retirement, manage debt, and track personal spending. The earlier one can begin to learn the basics, the better. However, there is always time to learn and apply lessons learned when it comes to handling one's own finances. 

Benefits of Financial Literacy:

Holistically, the benefit of financial literacy is to empower individuals to make smarter decisions. More specifically, financial literacy is important for several reasons.

• Financial literacy can prevent devastating mistakes: Seemingly innocent financial decisions may have long-term implications that cost individuals money or impact life plans. Financial literacy helps individuals avoid making mistakes with their personal finances.

• Financial literacy prepares people for emergencies: Financial literacy topics such as saving or emergency preparedness prepare individuals for the uncertain. Though losing a job or having a significant unexpected expense are always financially impactful, an individual can cushion the blow by implementing their financial literacy in advance by being ready for emergencies.

• Financial literacy can help individuals reach their goals: By better understanding how to budget and save money, individuals can create plans that set expectations, hold them accountable to their finances, and set a course for achieving seemingly unachievable goals. Though someone may not be able to afford a particular goal today, they can always make a plan to better increase their odds of making it happen.

• Financial literacy invokes confidence: Imagine making a life-changing decision without all the information you need to make the best decision. By being armed with the appropriate knowledge about finances, individuals can approach major life choices with greater confidence realizing that they are less likely to be surprised or negatively impacted by unforeseen outcomes.

If you are like we are at The Center and are interested in helping spread the word about Financial Literacy, organizations like Junior Achievement, The JumpStart Coalition, and The Consumer Financial Protection Bureau are great places to go to start.  

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the Sandra D. Adams, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Examples used are for illustrative purposes only.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.

Maximizing your 401k Contributions: Nuances to Save you Money

Contributed by: Nick Defenthaler, CFP®, RICP®

When starting a career, we are always told to contribute at least the minimum needed to get the full company match in our 401k (typically between 4% and 8%, depending on how your plan is structured). “Never throw away free money!” is a phrase we use quite often with children of clients who are starting that first job out of college.

But what about those who are well established in their career and fully maximizing 401k contributions ($22,500 for 2023, $29,000 if you are over the age of 50)? They should not have to worry about not receiving their full employer match, right? Well, depending on how your 401k plan is structured at work, the answer is yes! 

Let me provide an example to explain what I am referring to:
Let’s say Heather (age 54) earns a salary of $325,000 and elects to contribute 18% of her salary to her 401k. Because Heather has elected to contribute a percentage of her salary to her 401k instead of a set dollar figure, she will max out her contributions ($29,000) by the end of June each year. Let us also assume that Heather receives a 5% employer match on her 401k – this translates into $16,250/yr ($325,000 x 5%). If Heather does not have what is known as a “true up” feature within her plan, her employer will stop making matching contributions on her behalf halfway through the year – the point at which she maxed out for the year and contributions stopped. In this hypothetical example, not having the “true up” feature would cost Heather over $8,000 in matching dollars for the year!

So, how can you ensure you receive the matching dollars you are fully entitled to within your 401k? 
The first step I recommend is reaching out to your benefits director or 401k plan provider and asking them if your plan offers the “true up” feature. If it does, you are in the clear – regardless of when you max out for the year with your contributions, you will be receiving the full company match you are entitled to. 

If your plan does not offer the “true up” feature and you plan on maximizing your 401k contributions for the year, I would strongly suggest electing to defer a dollar amount instead of a percentage of your salary. For example, if you are over 50, plan on contributing $29,000 to your 401k this year, and if you are paid bi-weekly, elect to defer $1,115.38 every pay period ($1,115.38 x 26 pay periods = $29,000). Doing so will ensure you maximize your benefit by the end of December and not end up like Heather, who maxes out by the end of June and potentially loses out on significant matching dollars.  

Subtle nuances such as the “true up” 401k feature exist all around us in financial planning, and they can potentially have a large impact on the long-term success of your overall financial game plan. If you have questions on how to best utilize your employer’s 401k or retirement savings vehicle, please don’t hesitate to reach out to us for guidance. 

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Examples are hypothetical and are not representative of every employer's retirement plan. Not all employers offer matching 401(k) contributions. Please contact your employer's benefits department or retirement plan provider for terms on potential matching contributions.

Any opinions are those of Nick Defenthaler, CFP®, RICP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

Financial Resolutions to Consider for 2023

Contributed by: Kelsey Arvai, MBA

As the year comes to a close, it is time to start thinking about the New Year and starting it off on the right foot. What better way to accomplish this than by improving your financial health in 2023? January is Financial Wellness Month and Wealth Mentality Month – which serves as a reminder to get our finances in order and plan out our financial strategies. It is also the perfect opportunity to check in with your Financial Advisor to ensure you are financially prepared both in the short and long term.

While planning your financial resolutions, remember to be specific about what you want and why. The key to success is being clear about your priorities and choosing a particular goal. Make sure your goals are attainable, write them down, and post them somewhere where you will be reminded of them often. You can ensure accountability by creating calendar reminders to check in on your goals throughout the year.  

For additional resources on Financial Planning tips going into the New Year, check out Sandy Adams' blog from last year. I have also provided some additional ideas below from a blog I wrote last year:  

Automate Savings & Debt Reduction

Establishing and maintaining a positive cash flow is a top-tier priority for your financial health. Automation is key to efficiency and effectiveness while working towards your financial goals. Prioritizing your savings contribution through automation helps hedge against the temptation to spend the funds elsewhere. Utilizing automatic payments for your credit card could help your credit score if the payment happens before your due date. After establishing an emergency fund through your automated savings, you might consider directing excess cash to your retirement and health savings plans.

Max Out Your 401(k) & Health Savings Account (HSA)

The beginning of the year is a great time to review your 401(k) and HSA contributions to ensure that you are maximizing your benefits and taking advantage of increased deferral limits for 2023. 401(k), 403(b), and most 457 plan limits are now up to $22,500 for elective employee deferral. The catch-up contribution limit for employees aged 50 allows for an additional savings of $7,500. Similarly, HSA contribution limits are up to $3,850 for individuals and $7,750 for family coverage, with an additional $1,000 for employees 55 for older.

It is estimated that couples retiring today will face $200,000-$300,000 of out-of-pocket medical expenses over their retirement years. Since HSAs are not "use-it-or-lose-it" accounts, and they can be spent on any expense without penalty after 65, it is advantageous to fully fund these accounts every year.

Plan for Charitable Giving

Most people wait until December to give, but we recommend not being in such a rush that you wait until the end-of-the-year deadline and lose sight of your charitable goal. The beginning of the year is a great time to develop a plan for your year ahead. Consider reading the following blog posts to help you get started by picking a charity that is fulfilling for you.

How to Pick a Charity…During a Pandemic Part 1: Important Documents

How to Pick a Charity…During a Pandemic Part 2: Commitment to the Mission

How to Pick a Charity…During a Pandemic Part 3: Resources

Invest in Your Emotional and Physical Well-Being

As you take stock of your financial health this year, carving out time for your physical health is equally paramount. There is a connection between health and wealth; each should be analyzed and reviewed professionally, at least annually.

Reach Out to Your Financial Advisor 

Working with your advisor, at least annually, can provide support to keep you on track while determining and working towards financial goals.

On behalf of all of us at The Center, we wish you a happy and healthy 2023!

Kelsey Arvai, MBA is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the Kelsey Arvai, MBA and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Holding onto Cash? Here Are a Few Options to Get Some Interest!

Contributed by: Kali Hassinger, CFP®, CSRIC™

As Financial Planners, we often talk to clients about the importance of maintaining a cash reserve for emergencies or unforeseen expenses. In past years, the return on cash has been minimal, if not close to nothing, but throughout 2022, we have seen interest rates continually rise. This presents the opportunity to get some interest on cash! There are several options available, so which is most appropriate for you? Where to put cash savings, as with other investments, depends on your time horizon and goals.  

Money Market Accounts

Money Market accounts are offered through a bank or credit union, often offering greater interest than a typical savings account. The rates paid by a money market are based on current interest rates, and the rate you receive can adjust periodically. These rates are often more attractive than savings, but transaction limits and high minimum account balance requirements can exist. Rates can also be tiered, meaning the higher your balance, the higher the interest paid. These accounts are easily accessible, sometimes offering check-writing abilities, and insured through the FDIC up to $250,000. 

CDs

Short Term Certificates of Deposit, or CDs, purchased through a bank or credit union, are also FDIC insured but allow less liquidity than Money Market accounts. CDs earn a fixed rate over a pre-determined amount of time, ranging from a few months to several years. Accessing money before the maturity timeline can result in penalties, so be sure you will not need to access the funds before the required period.

Money Market Mutual Funds 

Money Market Funds hold a basket of securities that can generate gains and losses that will be passed onto shareholders. The investments held, however, are usually considered short-term and low-risk, such as U.S. Treasury bonds and high-quality corporate bonds. Unlike the Money Market accounts discussed above, the FDIC does not insure these funds. 

They are similar to Money Market accounts, however, in that interest rates fluctuate. Although there is an inherent risk with these funds, shareholders should not experience excessive price fluctuation, which can be held for short periods. Investors must trade into and out of these funds, so there can be a lag of a few days in order to access the account balance. 

Treasury Securities and Bonds

Treasury-backed securities have started to pay attractive rates as the Fed has continually raised interest rates throughout the year. These are backed by the U.S. government, which is another way of saying that they are generally considered some of the safest investments available. Treasury Bills are short-term securities with several term options ranging from four weeks to a year. Like CDs, you should only invest funds that you are confident you will not need to access before the maturity date, but these can be resold on the market if necessary. 

I-Bonds, sold through Treasury Direct, have become attractive for the first time in many years. These bonds must be purchased through TreasuryDirect.gov, and the amount an individual can purchase is limited to $10,000 per year (with additional allowances if you purchase paper I-Bonds). These must be held for a year, but if you cash them in earlier than five years, you lose three months of interest. 

If you are still determining which option is best for you or if you are interested in investing cash, be sure to reach out to your planner!

Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The forgoing is not a recommendation to buy or sell any individual security or any combination of securities. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kali Hassinger, CFP®, CSRIC™ and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Individual investor's results will vary. Past performance does not guarantee future results. Investments mentioned may not be suitable for all investors.

Retiring in a Bear Market Doesn’t Have to be Scary

Contributed by: Matt Trujillo, CFP®

Retiring in a poorly performing stock market can be scary, but here are some things to consider that may take some of the fear away:

• Bear markets come and go. However, while they are occurring, they are almost always uncomfortable for investors.

• Since 1950 there have been ten bear markets (defined as a 20% drop in major U.S. stock market indexes).

• Fortunately, as proven by history, they are also temporary.

• Investors can often weather the storm without changing their investment allocation much at all.

• If you are compelled to make changes, do so incrementally – avoid panic selling and major reallocations if you can. Patience can pay off since there is usually a bull market in the not-too-distant future!

Source: First Trust

It is also important to make sure you meet with your advisor at least once a year to review your circumstances and ensure your cash needs will be met for the next 24 months. You should also always be reviewing your asset allocation to make sure whatever cash needs are on the short-term horizon are set aside in more safe and stable investments. It would help if you also had some growth assets so your principal could keep pace with inflation and maintain purchasing power over time.

Our team at The Center is always here for any questions or concerns you may have. Please reach out to us anytime; we're happy to help!

Matthew Trujillo, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® A frequent blog contributor on topics related to financial planning and investment, he has more than a decade of industry experience.

The information contained in this letter does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Matt Trujillo, CFP®, and not necessarily those of Raymond James. Expression of opinion are as of this date and are subject to change without notice. There is no guarantee that these statement, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Individual investor’s results will vary. Past performance does not guarantee future results. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability.

The Largest Social Security Cost of Living Adjustment In Over 40 Years!

Contributed by: Kali Hassinger, CFP®, CSRIC™

It has recently been announced that Social Security benefits for millions of Americans will increase by 8.7% beginning in January 2022, making this the highest cost of living adjustment since 1981. The increase is calculated based on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, from October 1st, 2021, through September 30th, 2022. Inflation has been a point of concern and received a great deal of media attention this year, so this increase comes as welcome news for Social Security recipients who have received minimal or no benefit increase in recent years. 

In past years, the Medicare Part B Premium has often eaten away at the Social Security increase. In 2023, however, the base Part B Premium is being reduced by $5.20 to $164.90. This premium, however, can be increased based on income from the recipient's 2021 tax return. 

The Social Security taxable wage base will increase in 2023 from $147,000 to $160,200. This means that employees will pay 6.2% of Social Security tax on the first $160,200 earned, which translates to $9,933 of Social Security tax. Employers match the employee amount with an equal contribution. The Medicare tax remains at 1.45% on all income, with an additional .9% surtax for individuals earning over $200,000 and married couples filing jointly who make over $250,000. This is unchanged from 2022. 

For many, Social Security is one of the only forms of guaranteed fixed income that will rise over the course of retirement. The Senior Citizens League estimates that Social Security benefits have lost approximately 33% of their buying power since 2000. This is why, when working on running retirement spending and safety projections, we factor an erosion of Social Security's purchasing power into our client's financial plans. If you have questions about your Social Security benefit or Medicare premiums, we are always here to help!

Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

5 Tips to Keep in Mind for Financial Awareness Day

Contributed by: Kali Hassinger, CFP®, CSRIC™

Sunday, August 14th, marks National Financial Awareness Day. For many, unless you decide to focus on finances at some point in your life or you're already working with a professional, you may be left unsure whether you're making the right decisions and progressing toward financial independence. The good news is that a few steps can be taken to help you get on a sound financial path. 

Tip #1: Make a budget. And stick to it.

This is one of the most challenging steps for many to accomplish. There are things we need to pay for like housing, food, insurance, gas, and utility bills, and then there are unessential, discretionary items like clothes, concerts, and going out for dinner and drinks. Therefore, it's important to track your spending. How much of your overall budget goes toward the essentials each month? How much are discretionary or lifestyle expenses? If there are areas within the discretionary bucket that can be reduced and could ultimately be allocated toward additional savings, commit to making that adjustment. Budgeting is the foundation of getting ahead financially and progressing toward your goals.

It's also a good idea to look at your net income. Subtract out your fixed and essential expenses, and then allocate the leftover money towards savings goals and discretionary spending. Consider an online budgeting tool or app to help you achieve this.

Tip #2: Save.

Sure this seems obvious, but it's common to feel unsure of how much to save and whether you're saving enough. Saving depends on your age and the amount you've accumulated so far. It also depends on how much you plan to spend in retirement or what your upcoming financial goals require. If your employer has a retirement plan in place, it's important to contribute at least enough to take advantage of the employer match.

Many would suggest that you should always try to contribute the maximum amount allowed into your employer's retirement plans. When you consider current and future tax rates, timeline to retirement, and savings balances today, it gets more complicated. If you're later in your career and have accumulated a good balance, you may have the flexibility to reduce your savings rate and possibly your income. If you're behind and need to catch up, pushing yourself out of your comfort zone and saving aggressively may be necessary. If you're just venturing into the workforce, your income may be lower now than in the future. In this example, you may want to work in Roth IRA or 401k savings instead of tax-deferred vehicles. 

Saving rates are personal. Life is about balance and saving the amount right for you, your family, and your goals. 

Tip #3: Invest. 

But only take on the amount of risk that you can afford. Determining the appropriate blend of stock, bonds, and cash is essential to both growing and preserving wealth. In recent years of stock market growth, picking a lemon of an investment has been challenging. 2022, however, has reminded us of the importance of diversification and your overall allocation mix. If you have an investment strategy in place, now is not the time to abandon that plan. High inflation, rising interest rates, and international turmoil have created a volatile environment, but it can also create opportunities. If you have yet to invest, there's no better time than now to get a plan in place.  

If the idea of investing seems foreign, I suggest you review our Investor Basics blog series that our outstanding investment department provided a few years ago: 

• Stocks 101

• Bonds 101

• Drawdowns 101

Tip #4: Understand your credit score.

For a number that's so important to our ability to buy a home, purchase a car, or rent an apartment, credit scores can feel mysterious and sometimes frustrating. In reality, a formula is used to determine our credit score, and five main factors are considered. 

• 35% Payment History: Payment history is one of the most significant components of your credit score. Have you paid your bills in the past? Did you pay them on time?

• 30% Amounts Owed: Just owing money doesn't necessarily mean you are a high-risk borrower. However, having a high percentage of your available credit used will negatively affect your credit score.

• 15% Length of Credit History: Generally, having a longer credit history will increase your overall score (assuming other aspects look good). However, even people with a short credit history can still have a good score if they aren't maxing out their credit card and are paying bills on time.

• 10% New Credit Opened: Opening several lines of credit in a short period almost always adversely affects your score. The impact is even greater for people that don't have a long credit history. Opening multiple lines of credit is generally viewed as high-risk behavior.

• 10% Types of Credit You Have: A FICO score will consider retail account credit (i.e., Macy's card), installment loans, mortgage loans, and traditional credit cards (Visa/ MasterCard, etc.). So, having credit cards and installment loans with a good payment history will raise your credit score. 

It's important to manage your debt balance, only take out credit when necessary, and pay your bills on time. If you already have credit cards, student loans, and/or personal loans, try to pay off balances with higher interest rates to keep them from becoming unmanageable. Some people find it easier to pay off a smaller balance first, giving them a sense of progress and accomplishment. This is a more than acceptable start to proper debt management.

Tip #5: Work with a Professional.

There's no better time than now to build the foundation for financial security and independence. Working with a professional can help you answer questions and address the unknowns. By making smart decisions now, you're positioning yourself for future success. Use these helpful tips, and keep progressing toward the ultimate goal of a worry-free, financial future and retirement. 

Feel free to contact your team here at The Center with any questions. Take control now, and you'll rule your finances – not the other way around!

Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kali Hassinger, CFP®, CSRIC™ and not necessarily those of Raymond James. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

The “10-Year Rule” Update You Need to Know About

Contributed by: Jeanette LoPiccolo, CFP®

**The IRS has waived the 50% penalty for beneficiaries subject to the 10-year rule under the SECURE Act who have not taken 2021 or 2022 required minimum distributions (RMDs) from an inherited IRA. Learn more HERE.

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We have discussed the SECURE Act of 2019 in several blogs, but one of the details of the SECURE Act that many of us call the “10-year rule” may be changing slightly.

This blog discusses the impact on some Beneficiary IRA accounts, also called Inherited IRA accounts. It does not include beneficiary Roth accounts. 

In Feb 2022, the IRS released new proposed regulations (REG-105954-20). One of the surprises in this document was new guidance regarding the “10-year rule” for beneficiary IRA owners. The IRS requires that once IRA required minimum distributions begin, they should not be stopped. What does that mean? If the original IRA owner was over 72, they were subject to annual required minimum distributions (RMDs). When the beneficiary inherits an IRA subject to RMDs, those RMDs will need to continue.   

You may think, “I was told that the 10-year rule applies now”. But this refers to the category of eligible designated beneficiaries who are required to withdraw the inherited IRA funds by Dec 31 of the 10th anniversary of the original owner’s death. The “RMD” was understood to be the final withdrawal in the 10th year. For example, if Jane died in 2020 at age 75 and named her son Joe, age 40, as the sole beneficiary, Joe would have to withdraw all of the funds by Dec 31, 2030. For some beneficiaries, RMDs will be due annually, and the entire account must be withdrawn by the end of the 10th year.

If you have read this far, you already understand that this topic is complicated. While the proposed legislation is not enacted until it becomes law, proposed regulations are effective now. Therefore, we will notify our impacted clients of the potential RMD amount for their accounts. We also suggest that our clients wait until November to take action. Why wait? We may receive further updates from the IRS later this year. 

We continuously monitor, discuss, and review these changes with clients and as a firm. If you have any questions about how the rule could affect you or your family, we are always here to help!

Jeanette LoPiccolo, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She is a 2018 Raymond James Outstanding Branch Professional, one of three recognized nationwide.

The RJFS Outstanding Branch Professional Award is designed to recognize support professionals in RJFS branches who contribute to the success of their advisors and teams. Each year, three winners are selected and recognized during this year's National Conference for Professional Development. To be considered for this award, Branch Professionals must have been affiliated with Raymond James for at least one year and could not have won the award in the past.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.